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In a statement, the Commission noted that the proposed rules are intended to enhance investor confidence. False certification could expose executives to both civil and criminal legal action, SEC Commissioner Harvey Pitt reportedly said in a PBS interview.

“The CEO of a company should not be able to say ‘Gee, I didn’t realize’ or ‘I wasn’t aware’ or ‘I’m flying at 50,000 feet and therefore wasn’t paying attention to specific disclosures,”‘ Pitt asserted.

As CFO.com predicted back in January, the SEC also moved to get information to investors faster — particularly material information. Yesterday, the Commission proposed that several new items be reported in a company’s 8-K to improve the “quality, amount and timeliness of public disclosure of extraordinary corporate events.”

The SEC wants the 8-K filed within two business days instead of the current five to 15 days (see below for more on the proposed changes to 8-K filings).

The proposed CEO/CFO certification rules are consistent with a key provision of President Bush’s 10-point “Plan to Improve Corporate Responsibility and Protect America’s Shareholders,” announced March 7.

That plan states that CEOs should personally vouch for the veracity, timeliness and fairness of their companies’ public disclosures, including financial statements. As you recall, Chairman Pitt was nominated for his current post by President Bush last year.

Under the SEC’s proposed rules, the CEO and CFO must certify that they have read the company’s quarterly and annual reports, the information is true and the reports contain all information deemed “important to a reasonable investor.”

And just what constitutes information “important to a reasonable investor?” According to the SEC, there is a substantial likelihood that a reasonable investor would view the information as significantly altering the total mix of information in the report, and the report would be misleading to a reasonable investor if the information was omitted from the report.

In addition, a company will be required to maintain procedures to provide reasonable assurance that the company is able to collect, process and disclose the information required in the company’s reports, and also require a periodic review and evaluation of these procedures.”

“This annual evaluation would need to be presented to the company’s principal executive officer and principal financial officer, and these individuals would be required to certify in the company’s annual report that they have reviewed the results of the evaluation,” the SEC noted in its statement.

Proposed 8-K Rule Changes

The SEC’s proposals regarding the new 8-K rules would require current reports for 11 new items or events. They are:

Entry into a material agreement not made in the ordinary course of business.

Termination of a material agreement not made in the ordinary course of business.

Termination or reduction of a business relationship with a customer that constitutes a specified amount of the company’s revenues.

Creation of a direct or contingent financial obligation that is material to the company.

Events triggering a direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation.

Exit activities including any material write-off or restructuring.

Any material impairment.

A change in a rating agency decision, issuance of a credit watch or change in a company outlook.

Movement of the company’s securities from one securities exchange to another, delisting of the company’s securities from an exchange, or a notice that a company does not comply with a listing standard.

Notice to the company that its independent accountant is withdrawing a previously issued audit report, or that the company may not rely on a previously issued audit report.

Any material limitation, restriction or prohibition, including the beginning and end of lock-out periods, regarding the company’s employee benefit, retirement and stock ownership plans.

The SEC’s proposals also would move two disclosure items that currently are required in companies’ annual and quarterly reports to the 8-K. They are: Unregistered sales of equity securities by the company and material modifications to rights of holders of the company’s securities.

Corporate filers have 60 days to send comments about the SEC’s new proposals to the Commission.

Early Returns on Early Returns

Speaking of comments: Chairman Pitt is already receiving an earful on his earlier proposal to speed up the reporting of quarterly and annual corporate filings.

More than 50 companies in the Fortune 500, including Coca-Cola and Eastman Kodak, as well as four of the largest accounting firms, have told the Commission they oppose the proposed rules, according to Bloomberg.

Under the proposed rules, quarterly reports must be filed within 30 days of the end of the quarter, versus the current 45 days. Annual reports must be filed within 60 days of the end of the fiscal year, instead of the current 90-day grace period.

“The corporations have very valid concerns, and I think the SEC will give great weight to their comments,” David B. Martin, a Washington lawyer told the wire service. Martin headed the SEC’s corporation-finance unit from January 2000 to January 2002. “But while the SEC may compromise on the deadlines or the timing, I’d be surprised if they drop the proposal.”

The Council of Institutional Investors, which represents pension funds overseeing $1 trillion in assets, supports the SEC’s plan, according to Bloomberg.

One reason corporate filers oppose the speedier filings is that they doubt this requirement would have protected investors from the implosion of Enron Corp. More specifically, they doubt faster filings would have tipped shareholders to Enron’s use of off-balance-sheet partnerships to hide massive losses.

“We do not recall having read a single criticism of the timeliness of Enron’s financial statement filings,” Howard McLure, CFO at Caremark Rx Inc., reportedly said. “We have, however, read many thousands of words devoted to their accuracy.”

According to the wire service, companies that oppose the rules are seeking a compromise deadline of 40 days after the end of the quarter, instead of the 30 day limit proposed by the SEC.

Apparently, Coca-Cola management opposes the proposal because it is concerned that it would have trouble collecting information in a timely fashion from its operations in less-developed countries. “Our company still has significant challenges in collecting and properly analyzing data,” Coca-Cola controller Connie McDaniel told Bloomberg.

Likewise, Kodak Controller Robert Rozek told the wire service: “The proposed accelerated timeframe would have a negative impact on the quality of information reported” by the company.